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The Massachusetts Health Plan: Much Pain, Little Gain

In 2006, Massachusetts enacted a sweeping health insurance law
that mirrors the legislation currently before Congress. After
signing the measure, Gov. Mitt Romney (R) wrote, “Every uninsured
citizen in Massachusetts will soon have affordable health insurance
and the costs of health care will be reduced.” But did the
legislation achieve these goals? And what other effects has it had?
This paper is the first to use Current Population Survey data for
2008 to evaluate the Massachusetts law, and the first to examine
its effects on the accuracy of the CPS’s uninsured estimates,
self-reported health, the extent of “crowd-out” of private
insurance for both children and adults, and in-migration of new
Massachusetts residents.

We find evidence that Massachusetts’ individual mandate induces
uninsured residents to conceal their true insurance status. Even
setting that source of bias aside, we find the official estimate
reported by the Commonwealth almost certainly overstates the law’s
impact on insurance coverage, likely by 45 percent. In contrast to
previous studies, we find evidence of substantial crowdout of
private coverage among low-income adults and children. The law
appears to have compressed self-reported health outcomes, without
necessarily improving overall health. Our results suggest that more
than 60 percent fewer young adults are relocating to Massachusetts
as a result of the law. Finally, we conclude that leading estimates
understate the law’s cost by at least one third, and likely
more.

Our results hold important lessons for the legislation moving
through Congress. As in Massachusetts, there has been no effort to
estimate the cost of the private health insurance mandates that
legislation would impose on individuals and employers. The costs
may therefore be far greater than legislators and voters believe,
while the benefits may be smaller than the conventional wisdom
about Massachusetts suggests.